On the Money with Secure Money: Episode 65

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Video Transcript

Cynthia de Fazio – 00:20

And welcome to On The money with secure money. My name is Cynthia De Fazio and I’m joined today by Brian Quaranta. He is president and founder of secure money advisors, as well as joined by Neil Major senior investment advisor. Brian, how are you today?

Brian Quaranta – 00:33

I am great. How are you today?

Cynthia de Fazio – 00:35

I am fantastic. Thank you so much for asking. It’s always a pleasure to see you.

Brian Quaranta – 00:39

Good to be here.

Cynthia de Fazio – 00:40

Good. Neil. How are you?

Neil Major – 00:42

I’m well, Cynthia, how are you today?

Cynthia de Fazio – 00:43

Doing very, very well. Thank you so much. And how’s everything going?

Neil Major – 00:46

Good. Good to see you. Good. Good. Good. Well, gentlemen,

Cynthia de Fazio – 00:49

I know that we have such an exciting show today. Obviously, every week that we’re together, we talk about such an important topic, planning properly for retirement, and most importantly, making sure that you’re on the right track. Yeah. So Brian, right out of the gate, let’s talk about what does the right track really mean in regards to retirement?

Brian Quaranta – 01:08

Well, not running out of money. Most importantly, okay. Because a lot of people are going to be challenged with trying to generate some type of monthly income for themselves. And the biggest fear for most people is running out of money. So, number one, having a plan that is designed not to run out of money, even when we have market volatility, okay. And we can talk about that a little bit more. Having a good tax strategy, right, making sure that when you are retired, you’re paying the least amount of taxes possible, which can be challenging to do without proper planning, because most people have retirement accounts that they’re putting money into that are tax deferred, but when they pull the money out, they got to pay taxes on it. And for most people, they’re going to have to pull money out of the accounts, whether they want to or not, because we’ve got all these things called required minimum distributions, where the IRS force you to take the money and all kinds of stuff. Number three is having an improper investment mix in in in your retirement years, making sure that you have some downside protection should the markets become volatile. And that’s a really key area for most retirees, because most retirees cannot afford to lose a large amount of money, because they just don’t have the time to recover shall they did during their working years. And of course, you know, as you get older, there’s a possibility of a health event taking place, which you got to have ways to pay for that. And then of course, when the good Lord decides to take you home, you certainly want to make sure that your family is going to be the largest beneficiary of your money and not the IRS. And that’s where good estate planning comes in. And this is what we talk about all the time on the show, Cynthia, right. We talked about those five key areas where it’s income, taxes, investments, health care, and your estate planning. And that is what it means to be on the right tracking and all key out five key areas taken care of.

Cynthia de Fazio – 02:47

Brian, thank you so much. Neil, I should ask you, what are some common things that would make people derail from being on the right track? What are you seeing most often?

Neil Major – 02:56

Well, what I see most often really is just not having a plan, you know, and people aren’t doing the little things that are required, because I always say the little mistakes cause big headaches down the line. And what we see is people come in for second opinions, because they’ve watched the television show or, or they listen to the radio show, or they come to one of our educational events come in for a second opinion. They they’ve worked with their person for a long, long time. And they feel like they have a plan. But there’s some sort of something uncomfortable about the situation and problem into our office and what we identify as they really don’t have a plan. I mean, they have investments, which is great, but no strategy or no plan. And so, when you just focus on the investment planning aspect of it, that’s when you derail the right track, right? Because you haven’t thought about all the things that Brian just mentioned. And most oftentimes those people the reason that they’re in, they really have no peace of mind, either. Because they haven’t developed an actual plan, share.

Brian Quaranta – 03:57

The biggest thing that can derail somebody is market volatility. Yeah. Especially in retirement during your working years. It’s not an issue, because you’re probably not going to need the money during your working years. But eventually people need the money that they’ve saved for retirement. Yeah, that’s why it’s called retirement dollars. Exactly, exactly. And again, the fundamental problem is that 401 k’s are the popular way of saving for retirement. You know, it used to be the pension, but that doesn’t exist anymore. So, people are required to manage their own retirement and figure out how they’re going to get the income that they need on a monthly basis. And without proper protection of those assets. If the market doesn’t cooperate, and the markets going down, and people are taking money out, now they have a higher probability of running out of money. So those are those are the things that really can derail somebody very, very quickly. And if you don’t think it can happen, do you think about the people that retired in 2007 2008? You know, they retired and they’re going into retirement, they think everything’s going to be fine. And then we have, you know, the fight antral downturn and they lose 40 50% of their money. And I know people that had to go back to work because of that, you know, they would come into my office and say, you know, I was retired. But, you know, the, the firm that I was with was taking too much risk, and I lost half my money, where I lost 40% of my money, and I had to go back to work. And I don’t know, when I’m going to be able to retire, a lot of those people also had to delay retirement. So, if you didn’t come out of retirement, you had to delay retirement. And so, it’s secure money advisors, we want to build a plan that gets you retired and keeps you retired. Yeah, right apps. We don’t want to be coming back to you in five years and say, hey, sorry, the plan didn’t work. Yeah, you know. So, these are the important things you got to focus on.

Cynthia de Fazio – 05:39

What do you tell people that here? Don’t worry about it? It’s just a paper loss?

Brian Quaranta – 05:44

Yeah. Well, first off, does it feel like a paper loss? Right. And to some degree, it is okay. But here’s where it’s not a paper loss. So, you know, we all need money in the market, okay. But you can’t have 100% of your money in the market during retirement. Because, obviously, if you need to take money from those accounts and the markets down, now, it’s going to feel like more than a paper loss, because now you’re actually pulling money out of your account when the markets down. So, you’re locking into the loss. And then of course, you’re compounding the loss, right. But it is, it is essentially a paper loss, should you have time for that portfolio to grow. Meaning, you know, if the market becomes a little bit volatile, and you know, you have some of your money in the market, and you have some of your money in a protected account, and your market account, let’s say goes from 500,000, down to 450,000. I’m not concerned about that, as long as you have a sum of money that’s been protected, because that market account will have plenty of time to recover. And so therefore, it truly does, by definition become a paper loss because we’re not having to use that money yet, right? It becomes long term money. And that’s the difference. Because most people try to retire, they try to retire with 100% of their money in the market, then it becomes volatile, they start pulling money out. And now it gets really messy. And now they’re creating their Maker Gear. Either compounding losses by pulling money out. And this is becoming very dangerous, because there’s a high probability of failure than with the plan. And there’s a high probability that they may run out of money before they die, which is not a good thing.

Neil Major – 07:18

Sure, sure. to Brian’s point. I just recently had a guy come in him and his wife for a second opinion. And he just recently retired, he needs $2,000 a month from his savings, he has $500,000 in savings, while his first month into retirement. He’s down $60,000. Wow. And what he says to me as well, I’m in it for the long haul. I said, Sir, I disagree. I mean, because to Brian’s point, he’s starting to take income. And he never developed the strategy, all of his money was kept in the market to his brokers advice. And now it’s become very real, he no longer has the time for that money to come back. So, he’s locked in that loss.

Brian Quaranta – 07:58

not only that, but he’s no longer contributing to the account. Right. So, you know, a lot of times when before people retire, they’re typically in some type of an employer plan, like a 401 K. And so they’re contributing, and they’re also getting contributions from their employer, right. And that works really well, especially when markets are volatile. Because if markets are down, in this case, the guy is down 60 grand, if he wasn’t pulling money out of the account, he was still working, that wouldn’t be an issue because he would still be buying in, you know, to lower market levels and offsetting the losses by picking up shares at lower prices. Yeah, right. But now, he has no money going in, he has money coming out. And on top of that, he’s pulling it out when

Neil Major – 08:38

the market is down in easy income, right?

Brian Quaranta – 08:42

You got to do is run a basic math model. And you can figure out that when you do that there’s a high probability of failure. And that’s, that’s what people need to understand. And what we try to really communicate and educate people on is that the money that you have saved for retirement, that is not money that you get a second chance with, when you retire, it is not a dress rehearsal, you cannot get a redo on this thing. So, the 401k is the 403 B’s, the retirement savings accounts that we have today. They are the pensions of the past. Yeah, they need to be treated that way. You know, you think about the pensions of the past, nobody had to worry about that pension running out of money because it was being handled. And as long as you were alive, it was guaranteed to pay you for the rest of your life. And if you died, it probably even paid your spouse for the rest of your life. So, people had no pressure of worrying about the performance of that account, the market volatility because it was being done for them. Now they’re basically given the duties of half in and out build their own pensions, and yet they’re doing that trying to roll the dice in the market, which makes no sense.

Cynthia de Fazio – 09:49

Wow. Well, Brian, I know that you and Neil have a very special offer to present to the viewers at home today. Let’s talk about what that is and then open the phone line.

Brian Quaranta – 09:56

Sure, our right track retirement review folks was truly designed with you Wouldn’t mind to help get you on the right track? If you’ve ever wondered to yourself? Am I doing the right things? Do I have the right investment mix? Am I getting? Am I maximizing my returns? Am I paying the least amount in taxes as possible? This right track retirement review will help you identify this and help determine whether or not you’re on the right track. And I always say if you’re not on the right track, when would be a good time to know. So, for the next 10 callers who call in right now, we are going to give you a complimentary right track retirement review, you’re going to come into the office, we’re going to spend about 45 minutes to an hour with you. And you’re going to get a lot of information about what it means to be on the right track. Our job is to provide you with as much clarity and confidence going into retirement as we possibly can. But you got to do your part, you’ve got to schedule the appointment. So pick up the phone call 1-888-382-1298 and schedule your right trek retirement review today.

Cynthia de Fazio – 10:51

Brian, thank you so much, Neil, thank you so much to the viewers at home, the phone number call is on your screen. That number is 888-382-1298. As Brian and Neil have mentioned, if you’re not on the right track, wouldn’t you want to know today, this is the perfect opportunity for you to call in and schedule that appointment to the first 10 callers only. Again, 888-382-1298, we have to take a very short commercial break. But when we come back, I have so much more with Brian O’Neill. So, stay tuned.

Brian Quaranta – 11:18

So, everybody can tell you how to invest your money. There’s not a lot of people out there and a lot of firms that can teach you how to use your money. Most people also tell you that they’re scared. And the reason they’re scared is because they’re afraid of running out of money.

Neil Major – 11:32

The last thing you want to do is have a really good job and you’re in your 60s retire, be looking for work again in your late 70s.

Brian Quaranta – 11:40

The average person might say, well, a good portfolio would be a good mix of stocks, bonds, and mutual funds can have a good portfolio is all designed around the five key areas income, taxes, investments, health care and legacy planning.

Neil Major – 11:54

Because we’re not just product pickers here, what we do best here as we build retirement plans,

Brian Quaranta – 12:00

nine out of 10 people when they walk through the door would ask us, we just want to know if we’re on the right track. And I always say if you’re not on the right track, when would be a good time to know it. Probably now,

Neil Major – 12:11

people can actually see a vision once we start to really build out their plan.

Brian Quaranta – 12:16

This is about you if you’re not getting what you need. And you feel that when you walk out of the advisors office, it’s time to get a second opinion. And you can’t get a second opinion from the person that gave you the first the difference at secure money advisors. As a fiduciary firm, we help you manage the risk, build the income and give you the retirement.

Cynthia de Fazio – 12:48

And welcome back to on the money with secure money. My name is Cynthia De Fazio and I’m joined today by Brian quanta, he is president and founder of secure money advisors, as well as joined by Neil Major senior investment advisor. Gentlemen, a great show that we’re having talking, of course, about the stock market and investments, if you will. And I wanted to ask a question. Obviously, in the past people talked about bonds being such a safe investment tool, if you will. And there was something called the 60-40 rule. So, I want to talk to you a little bit about that. Brian, let me start with you. Is that still in effect today?

Brian Quaranta – 13:20

Yeah, I mean, I, you know, I think that’s we were probably referring more to the rule of 100 there of how you get to that 60-40. Okay. You know, they would always say, take 100 minus your age, you know, the rule of 100 was just basically take 100 minus your age, why 100 Because that’s typically was the life expectancy number that they were using to calculate risk. So, you take 100 minus your age, let’s say you’re 60, you know, equals 40, 100 minus 60, is 40. And they would say that, you know, your age is what you should really be putting in a safer investment. So, for the longest time, it was bonds. I can’t we have a chart at the office that showed what bonds were paying. Yes. And the reason why it works. So, well was back in the 90s. Right?

Neil Major – 13:59

Through the yields were like eight and a half percent, right. Yes, yeah. So as you get closer to retirement, you want to take some equities and move them to bonds to for a safer, more conservative investment. Yeah. Okay. And now, since what 2008, the average bond yields about 3.3%. Yeah, so it’s

Brian Quaranta – 14:22

Yeah, so it’s a little bit lower is I think it’s like 2.8, somewhere around there. But regardless, it’s very low. Right. Yeah. And, you know, so what would happen is when they would go to the 6040, split back then, you know, in the early 90s, mid 90s, I mean, you could put money into bonds, because it made sense, what, eight, eight and a half percent somewhere around there. Now, you’re going all the way to 3%. But the problem with the bond market is that you still, you know, assume the risk of the bar, right. And I don’t think a lot of people understand that, you know, there was a lady I know you had come in the other day that had some bonds, and you were explaining the seesaw to her, right.

Neil Major – 14:59

You know, let’s just say for example, you had a million dollars invested in bonds, and the yield on that was 3%. So, every year, you’re gonna get guaranteed $30,000 of interest income from that bond? Well, let’s say that you needed $60,000. To live off of right? Okay, so there’s a Delta there $30,000? Well, in order to get the additional income that you would need, you’re going to have to sell off some of your bond positions, right? Well, the problem is, bonds carry interest rate risk, as interest rates go up, bond prices go down, right. So, you’re going to be selling your bond at a loss if you need additional income. So that’s the challenge and utilizing bonds today is they’re not a great source to generate cash flow from Sure. Now, when they were yielding eight and a half percent, I’ll take that risk. Right, I’ll sell some bonds when I need to. But at 3%, it’s a totally different ballgame.

Brian Quaranta – 15:57

Not only that, but in when you were buying bonds at 8%, most likely interest rates were going to go down, which meant your bond prices were going to go up so your account balance your portfolio go up, we’re at all-time lows with interest rates. So, you think about the probability of your bond pricing, you know, going down, meaning you losing money in your portfolio, it’s at the probabilities high because interest rates only really have one way to go. And if they go up, your bonds are losing money. And now this becomes the same problem that you have with the stock market. Right? You’re pulling money out when the markets down, but yet you think you’re going into a safer investment. What we have found, and what research has shown is that the alternative to the bond market right now is a good annuity, you know, and annuities are becoming more and more popular in retirement planning, for good reason, I personally own myself, but they are an alternative to bonds, because we can still get maybe a four to 6% rate of return. And in a good annuity that still participates in market growth. But we can avoid all losses. So, we’re actually shifting the risk of principal, we’re shifting that to the insurance company. So, we no longer have the concern of losing principal. But we’re also shifting the interest rate risk. I mean, we’re not we’re no longer impacted. If interest rates go up in a bond, we’re losing money, we no longer have that, in a fixed annuity, typically a fixed indexed annuity. And that’s kind of becoming the new way of having a safer position. And, you know, at the end of the day, they act a lot like a bond to, you know, bonds have maturities on them, meaning, you know, during the bond maturity period, you know, you can sometimes only take interest, same thing with annuities, you know, they’ve got a little bit of a maturity period, but they’re still very not all annuities, because they’re not all created equal. There’s some really bad ones, but there’s really great ones out there too. But they can provide a really great source of cash flow, as you’re starting to build out the plan. And that’s all you’re trying to do is build a bridge, we always call it building an income bridge, meaning, you know, what we want to try to do is set enough money aside in your first phase of retirement, to get maybe 15 to 20 years’ worth of cash flow from a safe and guaranteed account. Why is that important? Because if we can get 15 to 20 years of safe cash flow, then that means our risk money has 15 to 20 years to grow. And we all know because it works. As long as you give your risk money time, we’re going to be completely okay. And that’s why with our clients, we’re not concerned about market volatility. So, when the market goes down, our portfolios do lose money. But because of our other the way we build out the model itself, I’m not concerned about that money losing because I don’t need it for a very long period of time. Okay. And then, of course, what happens over time is as that as that risk, money increases in value, you can actually pull a little bit of the profits right off of there, or the growth off of there, and you can bring it over to here and refill this bucket over here. And it works really, really, really well.

Neil Major – 18:49

And what I’ve noticed, Brian, and I’m you probably have noticed this as well, I think the consumer is educating themselves on what the different alternatives are at this point. Yeah, five, six years ago, when we talked about annuities to a potential client, you know, it was like, I’ve heard bad things about them right now. It’s like, yes, I do understand that that is the right investment for my safe part of the portfolio. So, I think that consumers’ minds has really changed around thinking and understanding that the annuity, as far as safe money goes, is truly the best available option currently.

Brian Quaranta – 19:27

Yeah. And, you know, our position as a fiduciary is we’ve got to do what’s in the client’s best interest. So when we’re looking at the portfolio, and we’re saying, okay, you know, this individual is 65 years old, they have no pension, they need 25 $30,000 A year, what’s the safest approach that I can take in generating this income to give the client the highest probability of success with their portfolio to not only grow it but also never to run out of money? And it leads us to these financial products? You know, find all financial products have a purpose, right, but the question is, what problems are we trying to solve? Right? And the purpose of the client’s money truly determines how we place that money and what financial products we use.

Cynthia de Fazio – 20:08

Okay, perfect. Well, Brian and Neil, I would love to reopen the phone lines. What do you think great time?

Brian Quaranta – 20:14

Yeah, folks, the right track Retirement System truly was designed with you in mind. Most people will always ask us, are we on the right track? Are we doing the right things? We say if you’re not on the right track? When would you want to know? Are you getting the best rate of return that you can? Are you taking the least amount of risk as possible? Are you maximizing your tax savings? If you’re not sure, take advantage of the right track retirement review. All you have to do is call us today for the next 10 callers. We’re going to give it out complimentary, but you need to do your part. Call 1-888-382-1298. And schedule with us today.

Cynthia de Fazio – 20:48

Gentlemen, thank you so very much to the viewers at home the phone number to call us once again on your screen. That number is 888-382-1298. We understand that you’ve worked your entire life to get the retirement years and you deserve to have the retirement of your dreams. As Brian O’Neill have mentioned, if you’re not on the right track, when is the right time to know that you probably want to know today, all you have to do is pick up the phone and call in 888-382-1298 We have to take a very short commercial break. But don’t go anywhere. I have so much more with Brian and Neil, the minute we return.

Brian Quaranta – 21:21

If I could help you increase your income, if I could help you pay less taxes, if I could help you potentially maximize the returns of your investments while reducing risk reducing fees if I could help you prepare for a health event or more importantly, when the good Lord decides to take you home to make sure that the money you’ve accumulated over your lifetime goes to your family and to your charities rather than the IRS would that be worth the time to come in and get a second opinion.

Cynthia de Fazio – 21:52

And welcome back to on the money with secure money. My name is Cynthia De Fazio. I’m joined today by Brian Quaranta. He is president and founder of secure money advisors, as well as joined by Neil Majors senior investment advisor, gentlemen, a wonderful show that we’re having today. And I love talking about the stock market how bonds play into that the rule of 100, if you will, we had a great question, actually from a caller. And if you don’t mind, I’d love to spend some time on that. So, Brian and Neil, I have a question for both of you. How do you help quantify someone’s risk?

Brian Quaranta – 22:21

Yeah, that’s a good question. So let me let me tell you the old way of quantifying versus the new way, and the Flip Phone way versus the smartphone way, the old way was you would have a conversation with the client about how they felt about risk. And then you would determine based on that conversation, whether or not they would belong in a conservative portfolio, a moderately aggressive or an aggressive portfolio, okay, based on a conversation. But a lot of times when people say to an advisor, I’m conservative. When we look at the portfolios, we actually don’t see a conservative portfolio, we actually see a risky portfolio. And the way that we’re able to quantify that today is through the use of a pretty good software program that we use that really has given us some cutting-edge advantages at our office, being able to show people based on a number, how much arrested they’re taking. And I know, you

Neil Major – 23:15

know, people want if they’re going to go to somebody for a second opinion, right? They don’t want somebody’s some other advisors opinion. They want real data. Yeah, good point. That’s what’s so helpful about the software program that we’re able to utilize, is we’re able to provide them real data and analysis on what they’re currently doing. So it’s a really, really great tool. And it basically lists out, you know, the type of risk, they’re taking the efficiency of the portfolio, the underlying investment fees, three-year returns, five year returns portfolio drawdown. So it’s just a really, really great tool to give somebody a true second opinion. Yeah. Now, I just had a guy last week come in. And he wanted the second opinion had been with his advisor for a long, long time. And what we identified was he was taking the same amount of risk as the s&p 500. Okay, so you know, and that was okay for him. But he definitely wanted to start to reduce his rescued about 10 years from retirement. Now, the numbers should match up, right? If you’re going to take the same amount of risk as the s&p 500, you should have a similar rate of return Correct? Absolutely. So you know what, when I ran the numbers, his five year return on that was about 12 and a half percent, okay. The s&p 500, during that same period of time, did about 18%. So the efficiency of his portfolio was pretty poor, for the amount of risk that he was taking, once you agree, to be able to show him that data, you know, just was, you know, really soothing to understand and see that maybe his guy, the fact that probably his biggest problem was he didn’t have a plan built, but now he’s seeing the In efficiencies of his portfolio as well,

Brian Quaranta – 25:01

yeah, and I think I think that’s a great point, because when you lay out the black and white facts for people, they can make informed decisions. Sure. Right. And that’s the one thing that we really like about our approach at secure money advisors is, even though we say come on in for a second opinion, we’re not giving you our opinion, right? The data is the data. So now it’s like, what do you want a or b, you know, a has a risk score of 75 with a return of 5%. Or Portfolio B has a risk score of 40, with a return of 10%, you know, so if I can take less risk and get a higher rate of return, you probably want to go for that portfolio versus the other one. But until this software program came out, there was no way to quantify risk in a very black and white method like we are now. And of course, that really helps people a lot. Because number one, at our office, we’re not there to sell anything, we’re truly there to help solve a problem. So, this software puts us in that position of problem solver for us to be able to say, here’s where you are, here’s what you could have, right? And a lot of people that it doesn’t take them very long to make the decision. Oh, my gosh, I had no idea that this was happening. And I should be getting this based on what I’m trying to do. It just makes sense for me to go from here to here.

Cynthia de Fazio – 26:13

Yeah, absolutely. Well, you’re both so passionate about designing a customized plan for each client that comes in. So, Brian, I have to ask you, we only have a minute and a half left of the show. That customizable plan. Is it adjustable as life changes to your client?

Brian Quaranta – 26:27

Yeah, we always say that it’s a living document, right? Because life does change. There’s ebbs and flows of life. And that’s the really nice thing about having a real written plan. And when we build out these models, it’s great because we’ll get phone calls throughout the year. We’re looking at buying a house, you know, and we want to take X amount of money out of our portfolio, is that going to be a problem? Is that going to cause us a problem down the road? Once we build your model, I’m able to plug these scenarios in and determine the risk of you making a certain decision. Now what we become as a financial sounding board, right? We become the family CFO. And now it gives the family a lot of confidence to go do the things that they want to do. Whether that be gifting money to kids taking everybody on vacation, buying a vacation home, whatever it might be, they do it with confidence. And that’s what our right track Retirement System is all about. Giving you clarity, and more importantly, giving you confidence to move forward in retirement and enjoy that time that you have. So for the next 10 callers who call in right now we are going to give you a complimentary right track retirement review. Remember, though, you got to do your part, pick up the phone. Call us today. Don’t procrastinate on this call 1-888-382-1298 and schedule with us today.

Cynthia de Fazio – 27:40

Brian, thank you so much, Neil. Thank you so much to the viewers at home most specifically. Thank you for spending time with us. That number is 888-382-1298 We’ll see you back one week from today. Be safe, be happy, be blessed and thank you for watching.